The two-day wheat rally pauses.
Grain futures are mixed this morning after the wheat's sharp Tuesday/Wednesday rally, with wheat pricing stalling and soybeans firmer. The markets are digesting the logistics of a potential reduction in wheat and corn exports out of Ukraine if military action was to commence. There is also the likelihood that this is posturing and the current political environment, with Putin showing a stronger hand to get his political endgame of NATO, leaving Ukraine autonomous.
Malaysian Palm oil overnight rose to new contract highs gaining 71 ringgits to settle at 5326 RM/MT. Indonesia’s push to using greater tonnage of palm oil in their diesel along with rumors of export restrictions has pushed palm oil values upwards. Palm oil is premium to the US soy oil market and has importers looking to the Gulf soy oil for offers. This is part of soybean oils recent resurgent in strength.
China has been rumored to be purchasing tonnage of corn and soybeans in appeasement of furthering trade negotiations with the Biden administration in reducing tariffs from their failure to accommodate the Phase 1 trade treaty which ended this past weekend. The trade will be awaiting acknowledgement of sales either this morning or Friday. Failure to see some action would be a price negative.
South American weather forecasts showed dry weather dominated Argentina and southern Brazil on Wednesday with just a few scattered showers of under half an inch across northern Brazil. Northern Brazil harvest is finally gaining speed but it’s going to take up to two weeks before full harvest is underway. The drought across southern Brazil and Paraguay has reached confirmed production losses to yield potential. The active storm pattern continues to remain for southern and central Argentina rainfall totals of 1.00-3.50” of rainfall anticipated through the weekend. The extended range model shows the dryness remaining in northern Argentina and southern Brazil well into early February. Crop potential will continue to decline in both countries on a regional basis.
Cattle futures were sharply higher on Wednesday as the commodity complexes overall were higher. Cash trading for cattle was steady at $137, Kansas was $1-two higher from the previous week at $137. Cattle slaughtered midweek has totaled 345,000 head, 4000 from last week but still, 6000 had fewer than a year ago. Despite the slightly better slaughter and production rate, the beef market continues to move sharply higher. The choice cutout gained $2.11 and select rose $2.04. The choice cutout has gained every day this year and has been higher in 20 out of 21 days. The NASS will release the January cattle on feed report this Friday. Early estimates are placements at 103% of last year, marketing’s 101% and feedlot inventories expected at 100%.